Keeping domestic fuel rates stable, while oil price continue to fall, can help curb petroleum consumption from “increasing too fast,” said the National Development and Reform Commission (NDRC), the country’s top economic planner.

Automobile emissions are part of the reason for worsening air pollution, the NDRC said.​Gasoline and diesel prices should have been cut by 200 yuan (US$31) a metric ton Tuesday based on its previous mechanism, according to ICIS China, a commodity researcher.

Photo by Wu Dongjun

“It seems that the government won’t cut prices until the pollution situation gets improved,” said Wei Wei, an analyst at Huaxi Securities Co. in Shanghai. “Otherwise more people will buy and consume cheaper fuel to add to pollution.”

Beijing issued its most severe smog warning last week for the first time, a red pollution alert, limiting industrial production, banning outdoor construction and halting classes at primary schools and kindergartens. Shanghai also had its worst smog in two years this week.

China changed its system for setting gasoline and diesel prices in March 2013 to more closely track refiners’ crude costs. Fuel prices have been reviewed every 10 working days based on the average price of a basket of crudes, down from 22 days previously.